Shares of Bandhan Bank Ltd tanked 9 per cent in Monday's trade after its MD and CEO CS Ghosh resigned, a few months before the renewal of his tenure. The stock fell 8.53 per cent to hit low of Rs 180.55 on BSE. The private lender had recently reported loan growth of 17.8 per cent YoY and deposit growth of 25.1 per cent YoY for the March quarter.
ICICI Securities said the timing of the resignation is unfortunate as the bank is still seeing elevated asset quality stress while the two executive directors are fairly new to the bank.
"We believe the stock price ahead could tread divergently vs underlying business or financial performance until more clarity emerges on MD & CEO succession. We have put Bandhan Bank’s rating and target price under-review until further clarity," the domestic brokerage said.
There is an anxiety over the abrupt exit and clarifications are unlikely to help the private lender, said Kotak Institutional Equities which noted that such abrupt changes are not new to the banking sector. Ujjivan SFB, RBL Bank Ltd, YES Bank Ltd and South Indian Bank, have seen exits in the past.
Kotak said the outcomes in each past situation were different, and not instance was an outcome of poor lending.
The discomforting situation in Bandhan Bank's case, however, has been the timing — with the approval for renewal pending only with the RBI— and, perhaps, better succession planning would have been an acceptable outcome, it said.
"The bank is yet to fully overcome the asset-quality issues post Covid, and the recent independent work initiated by CGFMU on the claims made by the bank is yet to be completed," Kotak said.
Jefferies has downgraded Bandhan Bank to 'Underperform' with a target of Rs 170. It has lowered its growth outlook and credit cost estimates for FY25-26 and cut its earnings per share (EPS) estimates by 10-14 per cent.
Arihant Capital Markets said Bandhan Bank may remain under pressure because of big name exits . The domestic brokerage said it would have 'Buy' on the counter if there is 10-15 per cent correction.
In his letter, Ghosh said he has indicated an interest in working in a broader role at the group level. Kotak said the development is an unexpected one, and it has probably come in at an inopportune time considering that the bank is yet to fully emerge from challenges on asset quality and stability at the senior management level.
"We have a positive view about the bank, but the current development is most likely to de-rate the bank from its current levels," Kotak said.